MOST FASHION ISSUES HURTING IN WAKE OF HONG KONG CRASH
NEW YORK — Despite recoveries in the Asian equities markets, the U.S. stock market continued its downward slide Friday, although a few fashion stocks managed to rally.
On the Paris Bourse, luxury stocks that took a beating Thursday failed to recover Friday. And while the Milan market continued to dip, analysts there said they were not seriously concerned about long-term effects of the Asian fluctuations.
In the U.S., the Dow Jones Industrial Average had risen 90 points in early trading Friday but ended down 132.36, or 1.7 percent, to 7,715.41, the lowest the average the Dow has finished in two months, since it closed at 7,662 on Aug. 29. The Dow lost 2.3 percent of its value Thursday.
The loss came even though Hong Kong’s Hang Seng index recovered 7 percent in Friday’s trading, after losing 10 percent on Thursday. Tokyo stocks also rebounded Friday, with the Nikkei average closing up 1.24 percent.
The recovery in Hong Kong’s battered stock market eased fears of a collapse of all Asian financial markets. Other markets recovering from Thursday losses were Shanghai, Shenzhen, Singapore, Jakarta and Manila.
The Financial Times index in London dipped 0.1 percent, as some early pickup based on the recovery in Hong Kong was reversed by the decline in the U.S.
Wall Street offered several reasons for U.S. stock skittishness, but most agreed that fears of prolonged volatility would likely temper the bullishness that has been evident in recent months.
Among the decliners were Gucci Group, down 1 to 39 1/4; Donna Karan International, 1/4 to 15 1/4; Estee Lauder Cos., 5/8 to 23, and Warnaco Group, 7/8 to 29 7/8. Notable gainers were Polo Ralph Lauren, up 3/4 to 26 7/8; VF Corp., 1 1/4 to 89; Liz Claiborne Inc., 1 5/16 to 53; and Revlon, 1 1/2 to 42 9/16.
Among retailers, Wal-Mart Stores fell 1 1/16 to 19 11/16 and Ross Stores Inc. shaved 1 3/8 to 35 7/8; but Federated Department Stores rose 3/4 to 43 3/4, Neiman Marcus added 5/8 to 35 1/4, and Saks Fifth Avenue moved up 9/16 to 23 1/16.
In Paris, following Thursday’s market slide in Hong Kong, stock prices of companies from LVMH Louis Vuitton Moet Hennessy to L’Oreal took a beating, losing anywhere from 4 to 7 percent of their value.
LVMH shares dropped 6.7 percent to their lowest price this year, 1,034 francs ($172.30) per share. On Friday, LVMH closed almost unchanged at 1,035 francs ($172.50). And Hermes, which trades on Paris’s Second Marche and lost 4 percent Thursday, fell another 3.47 percent Friday to close at 389 francs ($65).
One Paris-based luxury goods analyst said that shareholders are reacting to the uncertainty in Asian consumer and stock markets “psychologically and not looking at luxury companies’ fundamentals.”
“People are thinking that if a company does business in Asia, they should sell the stock,” the analyst said, stressing that this logic is faulty and doesn’t address how companies are performing in the region.
Comparing LVMH and Hermes, the analyst noted that it is illogical for Hermes shares to have dropped since the company has one of the healthiest distribution of sales by region among luxury firms. Asia, including Japan, accounted for 33.7 percent of the company’s 1996 turnover of $697.2 million. By comparison, LVMH, if DFS were integrated on a full 1996 year basis, would have 45 percent of $5.19 billion in sales coming from Asia. Plus, Hermes sales in Japan were up 50 percent for the first half of this year, compared to the same period last year, “which shows that Hermes has not saturated the market the way Louis Vuitton has,” he said.
The 5.4 percent drop in the share price of L’Oreal Thursday, closing at 2,082 francs ($347) per share, also defies logic, the analyst noted, since L’Oreal’s Asian business is well balanced by the cosmetics giant’s dominance in Europe and the U.S.
Friday, L’Oreal’s shares were down slightly to close at 2,069 francs ($344.83) per share.
The Milan bourse dipped 0.09 percent on Friday, after falling 1.7 percent Thursday. Bulgari shares, which fell 4 percent on Thursday, climbed back 2.5 percent on Friday to close at 10,890 lire ($6.25).
“Milan’s market is doing fine, and better than a lot of other European ones,” said Alberto Rolla, an analyst for Pasfin, an investment bank here. “We think the future looks relatively tranquil.”
Francesco Trapani, chief executive officer of Bulgari, the Rome-based jewelry and luxury goods house, downplayed the effects of the Asian economy. “The main driver of luxury business in the area is Japan, both with its internal consumption and with consumption when traveling in the Southeast Asian countries. Japan is being affected only marginally by the turbulence.”